In the sweltering heat of July 2018, Dale Redman, an oilfield service executive with a flair for the extravagant, made a move that would eventually lead to his downfall. Redman secured a $24.8 million loan to purchase the Whitehead Ranch, a sprawling 20,000-acre estate in the heart of central Texas, complete with two luxurious homes, livestock barns, and meadows teeming with wildlife. This indulgence seemed befitting of a Texas oil tycoon, but the way he sealed the deal would prove to be a critical error in judgment, setting off a chain of events that would cost him his position as CEO of ProPetro Holding Corp.
Redman used 230,000 shares of ProPetro stock as collateral for the ranch loan, a decision he made without informing the company’s investors. This move violated his fiduciary duty to protect shareholder interests, as revealed by the company when they announced Redman’s resignation on Monday. The fallout from this disclosure marked the beginning of the end for Redman, whose actions were under scrutiny long before his departure.
Less than three weeks before Redman’s resignation, Reuters had sent a letter to him and the ProPetro board, inquiring about the ranch loan and other questionable financial dealings. A subsequent Reuters investigation uncovered a troubling pattern of conflicts of interest, all stemming from Redman’s entanglement of personal business ventures with the operations of ProPetro, a company that had paid him handsomely—$15.6 million between 2016 and 2018.
The investigation revealed that Redman’s personal ventures were not just side projects; they were deeply intertwined with ProPetro’s business dealings. At least four contracts awarded by ProPetro were found to have benefited private companies owned by Redman. Furthermore, Redman had positioned three of his close relatives and two other executives’ family members in high-paying roles within ProPetro, creating an environment rife with nepotism and potential conflicts of interest.
One particularly concerning arrangement involved another loan Redman secured, using company stock as collateral to purchase yet another ranch. Such practices, while not illegal, are generally frowned upon in public companies because they pose significant risks to shareholders. If an executive is forced to liquidate shares to cover a loan, the company’s stock value could plummet.
Redman and a ProPetro spokesperson refused to comment on these matters, even as the Securities and Exchange Commission (SEC) launched an investigation into potential financial irregularities at ProPetro. Since news of the investigation broke in October, ProPetro’s stock has fallen significantly, and the company has delayed filing its financial reports with the SEC, citing the need to confirm the accuracy of its accounting.
Adding to Redman’s woes, he sold the Whitehead Ranch in January and put his private jet up for sale—both signs of a once-glamorous lifestyle now under pressure. He also faces multiple investor lawsuits accusing him and other ProPetro executives of enriching themselves at the expense of shareholders and distributing misleading information.
The Web of Deals and the Fall of an Oilfield Giant
Founded in 2005, ProPetro quickly grew into one of the leading fracking companies in the Permian Basin, the most productive oilfield in the United States. By 2018, the company was generating $1.7 billion in sales, largely by fracking wells for major players like Exxon Mobil and Diamondback Energy. But behind the scenes, Redman was leveraging ProPetro’s success to benefit his personal enterprises.
In one instance, ProPetro purchased $10 million worth of sand from a company that mined it on land leased from a firm in which Redman held a 44% stake. This deal netted Redman about $300,000 in royalties. Although ProPetro’s audit committee approved the deal without Redman’s involvement, the arrangement raised eyebrows, particularly since one of the audit committee members had previously worked as an accountant for Redman’s firm.
Further complicating matters, Redman’s company, South Midkiff Partners LLC, co-owned with then-Chief Financial Officer Jeffrey Smith, charged ProPetro at least $420,000 annually for renting work properties and equipment yards. Another Redman-owned entity, PD Properties, earned $192,000 in 2017 by renting oilfield equipment to ProPetro and received $72,000 per year in rent for ProPetro’s corporate offices under a five-year deal.
Perhaps most egregiously, Redman rented out his private jet to ProPetro for business trips, pocketing nearly $400,000 in 2018 alone. The purpose of these trips was not disclosed, nor was it clear who traveled on Redman’s Learjet. In at least one instance, Redman used the plane to reward an oilfield crew with a trip to New Orleans to watch a Saints football game.
A Family Affair: Nepotism and the Downfall of ProPetro
The rot within ProPetro extended beyond Redman’s personal deals. A Reuters review of company filings revealed that Redman’s son-in-law earned $530,500 in 2018 while working in sales for ProPetro. Meanwhile, the daughter of former CFO Smith served as the company’s controller, earning $338,800, and the son of the chief operating officer, David Sledge, was head of investor relations, with compensation totaling $717,000.
These revelations prompted ProPetro to initiate an internal audit of its financial controls. The audit, which began in mid-2019, has since led to the departure or demotion of several top executives and board members. On Monday, ProPetro announced that Redman had stepped down as CEO, to be replaced by Phillip Gobe, a seasoned executive with experience at other energy companies, including Pioneer Natural Resources.
The Ranches: Symbols of Success or Hubris?
Redman’s foray into ranch ownership began around the time ProPetro went public. Starting in mid-2017, he used as many as 601,200 ProPetro shares—worth more than $8 million at the time—as collateral for two separate loans. The first loan, secured in May 2017, was with Vista Bank, though the purpose and amount of the loan remain unclear. However, local real estate records show that in January 2017, Redman purchased the Preston Ranch in Menard County, Texas, valued at $10.4 million.
In late 2018, Redman purchased the Whitehead Ranch, borrowing $24.8 million from West Texas National Bank. However, two months later, he revised the loan agreement to remove ProPetro shares as collateral. While Redman still owns the Preston Ranch, he sold the Whitehead property in January after listing it for $30 million.
The real estate listing for the Whitehead Ranch described it as “The Queen of the Texas Hill Country,” a title that now seems ironic given Redman’s precipitous fall from grace. The property’s turkey hunting was touted as “second to none,” but in the end, it was Redman’s hunting for personal gain at the expense of his company that led to his undoing.
As the dust settles, ProPetro is left to pick up the pieces of a governance scandal that has rocked the company to its core. Meanwhile, Redman’s story serves as a cautionary tale of how personal ambition, when unchecked, can lead to public disgrace and the downfall of an oilfield empire.
